A simple approach, called PMP (Paris Metro Pricing), is suggested for dealing with congestion in packet networks such as the Internet. It is to partition a network into several logical networks, each of which would treat all packets equally on a best effort basis, just as the current Internet does. There would be no formal guarantees of quality of service. The separate networks would differ only in the prices paid for using them. Networks with higher prices would attract less traffic, and thereby provide better service. Price would be the primary tool of traffic management. 1. Introduction The Internet is the great success story of the 1990s. However, endemic congestion has led to wide dissatisfaction, and there is general agreement that new applications, especially real time ones such as packet telephony, will require higher quality of service. Various solutions to data network congestion are being developed, typically involving bandwidth reservation or priority setting. (See [Huit...

Can high quality be provided economically for all transmissions on the Internet? Current work assumes that it cannot, and concentrates on providing differentiated service levels. However, an examination of patterns of use and economics of data networks suggests that providing enough bandwidth for uniformly high quality transmission may be practical. If this turns out not to be possible, only the simplest schemes that require minimal involvement by end users and network administrators are likely to be accepted. On the other hand, there are substantial inefficiencies in the current data networks, inefficiencies that can be alleviated even without complicated pricing or network engineering systems.

The simple model on which the Internet has operated, with all packets treated equally, and charges only for access links to the network, has contributed to its explosive growth. However, there is wide dissatisfaction with the delays and losses in current transmission. Further, new services such as packet telephony require assurance of considerably better service. These factors have stimulated the development of methods for providing Quality of Service (QoS), and this will make the Internet more complicated. Differential quality will also force differential pricing, and this will further increase the complexity of the system. The solution of simply putting in more capacity is widely regarded as impractical. However, it appears that we are about to enter a period of rapidly declining transmission costs. The implications of such an environment are explored by considering models with two types of demands for data transport, differing in sensitivity to congestion. Three network configurati...

. Costs of communications networks are determined by the maximal capacities of those networks. On the other hand, the traffic those networks carry depends on how heavily those networks are used. Hence utilization rates and utilization patterns determine the costs of providing services, and therefore are crucial in understanding the economics of communications networks. A comparison of utilization rates and costs of various networks helps disprove many popular myths about the Internet. Although packet networks are often extolled for the efficiency of their transport, it often costs more to send data over internal corporate networks than using modems on the switched voice network. Packet networks are growing explosively not because they utilize underlying transport capacity more efficiently, but because they provide much greater flexibility in offering new services. Study of utilization patterns shows there are large opportunities for increasing the efficiency of data transport and mak...